Go Back  PPRuNe Forums > Flight Deck Forums > Terms and Endearment
Reload this Page >

Norwegian burning cash!

Terms and Endearment The forum the bean counters hoped would never happen. Your news on pay, rostering, allowances, extras and negotiations where you work - scheduled, charter or contract.

Norwegian burning cash!

Old 1st Apr 2018, 00:17
  #101 (permalink)  
 
Join Date: Aug 2017
Location: UK
Posts: 204
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by RexBanner View Post
Tell me where customer sentiment fits in to the cold hard economics? Passengers love flying on the A380, however the airlines have voted with their feet as far as purchases of that model go. Same with Concorde vs the Boeing 747. In the end the economics always wins. And that does not favour Norwegian because their model is fundamentally flawed and they are a complete basket case in terms of finances.
Yep economics normally wins and the 787 is mile ahead of the nearest competitor, no WiFi on long haul until late 18
EIFFS is offline  
Old 19th Apr 2018, 21:37
  #102 (permalink)  
Thread Starter
 
Join Date: Jul 2006
Location: East of Monkey Island!
Age: 47
Posts: 152
Likes: 0
Received 0 Likes on 0 Posts
Out of cash??

https://newsroom.aviator.aero/norweg...-boc-aviation/

Last edited by babemagnet; 19th Apr 2018 at 21:41. Reason: Wrong link
babemagnet is offline  
Old 20th Apr 2018, 00:30
  #103 (permalink)  
 
Join Date: Oct 2005
Location: Everyplace
Posts: 241
Likes: 0
Received 0 Likes on 0 Posts
Probably. Norwegian is a company that if they moderate the LH expansion and keep the SH expanding they can get back on profitable numbers very fast. They should sale more of those 787 and wait for the A321LR to expand LH.
7Q Off is offline  
Old 20th Apr 2018, 01:44
  #104 (permalink)  
 
Join Date: Jun 2015
Location: High n Blighty
Posts: 113
Likes: 0
Received 0 Likes on 0 Posts
Its beginning to sound like AirEurope, that went bust in 1991. I remember this event well. From wikipedia "Air Europe's success came to an end – the cost of borrowing rose (to the detriment of highly debt-leveraged companies) and financial problems beset its parent company"

OMG, this is so similar to Norwegian's predicament. The cost of borrowing is rising, and political tensions are too.

I would hate to see Norwegian beaten down by BA and IAG. Its such a thorn in BA's side, but as usual, the incumbents still win. BA AF KLM will still be around , still charging the earth, long after NLH has been gobbled up.

Anyone putting up €40000 for their B787 training bond at the moment needs to be prepared for the worst.
The Crew is offline  
Old 20th Apr 2018, 23:49
  #105 (permalink)  
 
Join Date: Jul 2007
Location: Germany
Posts: 1
Likes: 0
Received 0 Likes on 0 Posts
no down payment necessary. just a guarantee you can pay.
VinRouge is offline  
Old 21st Apr 2018, 08:57
  #106 (permalink)  
A4

Ut Sementem Feeceris
 
Join Date: Jul 1999
Location: UK
Posts: 3,319
Likes: 0
Received 0 Likes on 0 Posts
no down payment necessary. just a guarantee you can pay.
....which may be called on in a liquidation/bankruptcy scenario? Are you not a debtor to the company which administrators would chase?

A4
A4 is offline  
Old 21st Apr 2018, 09:24
  #107 (permalink)  
A4

Ut Sementem Feeceris
 
Join Date: Jul 1999
Location: UK
Posts: 3,319
Likes: 0
Received 0 Likes on 0 Posts
....er no. An administrator is required to recover as much money as possible on behalf of creditors (banks). I have no idea if it is an enforceable contract between DLH, the type rating company or agency and the pilot.

I have no desire to see DLH fail - I’ve been on the receiving end of an airline failure and it’s a horrible place to be. I’m just asking the question - that’s all.

A4
A4 is offline  
Old 21st Apr 2018, 09:34
  #108 (permalink)  
A4

Ut Sementem Feeceris
 
Join Date: Jul 1999
Location: UK
Posts: 3,319
Likes: 0
Received 0 Likes on 0 Posts
I’d also be very surprised if it was enforceable in the event of a failure.....but with way employment practices/contracts have gone in the last few years in our industry and the bonus driven culture of management remuneration it’s not beyond belief.

A4
A4 is offline  
Old 21st Apr 2018, 11:41
  #109 (permalink)  
 
Join Date: Apr 2008
Location: Up high
Posts: 555
Likes: 0
Received 0 Likes on 0 Posts
You are all getting a bit ahead of yourselves. Norwegian has a big pile of debt, true and it is making a small loss while going through some explosive growth, true but....

It owns a whole pile of aircraft
It owns a whole load of very valuable slots at main airports
It has firm delivery slots for A320 neos, 737 MAX and 787 worth a whole pile of money (that is just the delivery slots)
It has the backing of the Norwegian sovereign wealth fund (who has a long term investment horizon unlike other funds)
It has just now gone through the first equity raise in 9 years which has been fully subscribed by existing shareholders. It hasn't even tapped the open market.
The existing debt, they say, is financed at low long term fixed rates
It has on the table a buyout offer from IAG

Expansion costs money. New routes take time to mature, newly hired staff take time and money to be trained and to be productive, AC cost money, etc, etc, etc The amazing thing is that they are able to carry out such explosive growth without raising more (much more ) capital. Some companies use their profits to make a dividend pay out, Norwegian is using them to grow and attain a critical size to allow the necessary economies of scale to compete. I am sure the Norwegian sovereign wealth fund is happy with that.
Elephant and Castle is offline  
Old 21st Apr 2018, 12:32
  #110 (permalink)  
 
Join Date: Mar 2011
Location: ZKPY
Posts: 103
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by A4 View Post
....which may be called on in a liquidation/bankruptcy scenario? Are you not a debtor to the company which administrators would chase?

A4
Which on the other hand is quoted in the contract, that if this is the case, the bank guarantee will become invalid. Rishworth, is btw the actual employer. The company which rents out its services to Norwegian. So if big daddy goes bust, no liquidator will ever be able to take in those guarantees. This is also the case for any other contract (e.g. the SEPLA Collective agreement in Spain). Here, the guarantee runs (again!) over OSM Aviation and not Norwegian itself.
It is clearly stated that the bonding can ONLY be claimed if the employee choses to leave within a certain amount of time. Which in this case is three years. No money will be claimable for any other reason (except of course misconduct) than the one stated above.

Stop spreading horsesh*t.
lansen is offline  
Old 21st Apr 2018, 12:37
  #111 (permalink)  
 
Join Date: Feb 2008
Location: Euroland
Posts: 97
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by Elephant and Castle View Post
You are all getting a bit ahead of yourselves. Norwegian has a big pile of debt, true and it is making a small loss while going through some explosive growth, true but....

It owns a whole pile of aircraft
It owns a whole load of very valuable slots at main airports
It has firm delivery slots for A320 neos, 737 MAX and 787 worth a whole pile of money (that is just the delivery slots)
It has the backing of the Norwegian sovereign wealth fund (who has a long term investment horizon unlike other funds)
It has just now gone through the first equity raise in 9 years which has been fully subscribed by existing shareholders. It hasn't even tapped the open market.
The existing debt, they say, is financed at low long term fixed rates
It has on the table a buyout offer from IAG

Expansion costs money. New routes take time to mature, newly hired staff take time and money to be trained and to be productive, AC cost money, etc, etc, etc The amazing thing is that they are able to carry out such explosive growth without raising more (much more ) capital. Some companies use their profits to make a dividend pay out, Norwegian is using them to grow and attain a critical size to allow the necessary economies of scale to compete. I am sure the Norwegian sovereign wealth fund is happy with that.
Where do you find that the Norwegian sovereign wealth fund holds any ownership in Norwegian Air Shuttle? I've just checked on their webpage and I cannot find any information that they hold a single share in NAS.

Well they don't pay out any dividends because there is hardly any money to pay out even if they wanted to. Their EBITDA margins looks like a roller coaster last 10 years and the OP cash flow hardly increase at all. Looks like they expand with negative profitability. The question seems to be for how long the lenders/shareholders accept no return on their money. It will always be a point where they have had enough. Unfortunately the only financial curves that are beautiful to look at when you screen NAS is their debts and revenue.
Moonwalker is offline  
Old 21st Apr 2018, 13:02
  #112 (permalink)  
 
Join Date: Jan 1999
Location: north of barlu
Posts: 6,207
Likes: 0
Received 0 Likes on 0 Posts
Training bonds

For some reason the repayment of training bonds to bankrupt companies is etched into the psyche of some pilots back in 1999 when Debonair went bust the staff / administrators meeting was dominated by questions about training bond repayment. The administrators became increasingly baffled by the same questioned asked repeatedly when they had said they could not ask for the pilots under bond to repay anything.

The fact of the matter is the courts would take a very dim view of company bankruptcy administrators taking action to recover training bond money from a person who had just had the means to repay the debt removed by the very bankruptcy they are administering.

This is a historical comment on the industry and not a comment on any other issue.
A and C is offline  
Old 21st Apr 2018, 13:22
  #113 (permalink)  
A4

Ut Sementem Feeceris
 
Join Date: Jul 1999
Location: UK
Posts: 3,319
Likes: 0
Received 0 Likes on 0 Posts
lansen - if you note my post had a question mark at the end of it......so no spreading of horse$hit on my part. But thanks for the answer.

A4
A4 is offline  
Old 21st Apr 2018, 18:46
  #114 (permalink)  
 
Join Date: Apr 2008
Location: Up high
Posts: 555
Likes: 0
Received 0 Likes on 0 Posts
Where do you find that the Norwegian sovereign wealth fund holds any ownership in Norwegian Air Shuttle

Folketrygdfondet owns 3.57 million shares. The second largest owner behind the CEO and founder.

Another 2.13 million shares are owned by DNB Asset Management AS, which is in turn owned by the ministry of trade and industry.

All freely available info, for example at:

NAS Stock Price & News - Norwegian Air Shuttle ASA - Barron's

Well they don't pay out any dividends because there is hardly any money to pay out even if they wanted to
If they had chosen to not spend the money on growing the company there would be plenty of profits and money to pay out.

Last edited by Elephant and Castle; 21st Apr 2018 at 19:00.
Elephant and Castle is offline  
Old 21st Apr 2018, 20:03
  #115 (permalink)  
 
Join Date: Jul 2007
Location: Germany
Posts: 1
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by A4 View Post
I’d also be very surprised if it was enforceable in the event of a failure.....but with way employment practices/contracts have gone in the last few years in our industry and the bonus driven culture of management remuneration it’s not beyond belief.

A4
Yes it is. It wouldn't pass the daily mail test for a start. You could destroy the liquidators with one interview on Radio 5/LBC/Redundant of Crawley on the third page of the daily mail.
VinRouge is offline  
Old 22nd Apr 2018, 07:58
  #116 (permalink)  
 
Join Date: May 2003
Location: UK
Posts: 433
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by TangoAlphad View Post
It irks me the doom and gloom sayers and most don't even understand the finances happening in the background.

Yes they are pushing hard. Yes it is risky. The core business is profitable they are just pushing hell for leather into expansion which is shortly winding back.

There is some serious heavyweight financing behind the brand and immense pride from the Norwegians who are effectively backing it.

I'm not saying it isn't risky and all is rosey but if you are going to come on here spouting confidently it will fall to bits at least bloody find out the basic easily available information about the company!!
I don’t work for Norwegian. And I fully agree with what you say. Most people have who ‘talk down’ Norwegian have next to no idea of business or economics and simply fail to understand the first thing about growing a business or the concept of debt.
Boeing 7E7 is offline  
Old 22nd Apr 2018, 17:42
  #117 (permalink)  
 
Join Date: Dec 2008
Location: uk
Posts: 902
Likes: 0
Received 0 Likes on 0 Posts
I think it's fair to say that nobody knows anything about the financing of the aviation business until the day before the receivers walk in. Airlines do have a bit of a habit of spectacularly imploding. Not saying Norwegian is likely to go under, but if it did, or if IAG take it over, who'd be massively surprised?
macdo is offline  
Old 22nd Apr 2018, 17:57
  #118 (permalink)  
 
Join Date: Jul 1999
Location: Out of a Suitcase
Posts: 153
Likes: 0
Received 0 Likes on 0 Posts
Thumbs down

Originally Posted by lansen View Post
Which on the other hand is quoted in the contract, that if this is the case, the bank guarantee will become invalid. Rishworth, is btw the actual employer. The company which rents out its services to Norwegian. So if big daddy goes bust, no liquidator will ever be able to take in those guarantees. This is also the case for any other contract (e.g. the SEPLA Collective agreement in Spain). Here, the guarantee runs (again!) over OSM Aviation and not Norwegian itself.
It is clearly stated that the bonding can ONLY be claimed if the employee choses to leave within a certain amount of time. Which in this case is three years. No money will be claimable for any other reason (except of course misconduct) than the one stated above.

Stop spreading horsesh*t.
I'm familiar with a bankruptcy where the bonds were claimed. It went like this.

-Company in receivership but did not fire anyone.
-Other job was available immediately forcing the bonded people to resign in order to get this job within a limited time frame.
-As soon as they submitted their resignation the bond was claimed.
-A few days after the last bonded person resigned the company declared bankruptcy.

Don't think something similar can't happen.

Last edited by Eric Janson; 22nd Apr 2018 at 17:59. Reason: added text
Eric Janson is offline  
Old 23rd Dec 2018, 11:15
  #119 (permalink)  
Thread Starter
 
Join Date: Jul 2006
Location: East of Monkey Island!
Age: 47
Posts: 152
Likes: 0
Received 0 Likes on 0 Posts
babemagnet is offline  
Old 23rd Dec 2018, 17:12
  #120 (permalink)  
 
Join Date: May 1999
Location: Europe
Posts: 153
Likes: 0
Received 0 Likes on 0 Posts
Scare Mongering doesn't help

No covenants have been breeched yet.
Not withstanding their equipment issues, look at the presence they have in the market.
Should they require addition external funding there will be no shortage of suitors, it's just a matter of how much of the pie the principles are will to sell and to whom and at what price.

The crew will be ok and on that note Merry Christmas to all.
Maxfli is offline  

Thread Tools
Search this Thread

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell or Share My Personal Information

Copyright © 2023 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.